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Do Weak Governments Doom Developing Countries to Poverty?

When you read what economists have to say about development, it is easy to be disheartened about the prospects for poor countries. One big reason is that slow changing institutional factors are seen as key to development prospects. I’ve just published a CGD book that’s a little more optimistic: Results Not Receipts: Counting the Right Things in Aid and Corruption.

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Most of the book is about what donor agencies like DFID and the World Bank should do about corruption in aid projects, but Results Not Receipts also discusses the role of corruption and weak governance in determining development outcomes more broadly—the subject of the sample chapter. And in that chapter, I’m more optimistic about progress both through improved institutions and despite weak institutions than some of my peers.

The dominant view amongst development economists is that historical forces and slow-changing government institutions have significantly determined development outcomes. In their blockbuster paper “The Colonial Origins of Comparative Development,” published in 2001, Daron Acemoglu and Simon Johnson from MIT and James Robinson from the University of Chicago traced through a causal chain, noting a strong relationship between mortality rates faced by soldiers, bishops, and sailors in colonies and the type of legal and political institutions they created—and between those early institutions and institutions today. Since then, economists from around the world have linked historical differences from soil type, through the extent of the slave trade to ancient knowledge of the wheel all through norms, culture, and institutional forms to modern economic outcomes.

And development economists have compiled measures of institutional quality that directly suggest institutions are slow to improve. CGD’s Lant Pritchett and colleagues studied the Worldwide Governance Indicators (initially complied by researchers at the World Bank). They suggest it would take over 600 years for Haiti to reach Singapore’s quality of government effectiveness as measured by those indicators, even with a generous interpretation of its previous rate of progress.

The abiding relationship between comparative development success today and historical measures of development cannot be denied. Nonetheless, for all the importance of history to comparative development, there’s a lot more to progress than the past. Around 5.1 billion people worldwide live in countries where we know average incomes have more than doubled since 1960. Nearly 2.2 billion people are in countries where average incomes have more than quintupled over the past 50 years. In Africa, eight economies in the region ended the last decade twice the size they’d started it. And as a whole, the developing world significantly outperformed rich countries in weathering the storm of the global financial crisis. It isn’t just income; other measures of the quality of life including health are rapidly improving worldwide—about two million children born this year will live to their fifth birthday who would have died were mortality rates unchanged from 10 years ago.

That progress is possible because countries at a given level of settler mortality or other measures of historical development are seeing better outcomes over time. And that suggests one of two things: either institutions can change faster than some measures suggest, or development isn’t just about slow-changing institutions. It is probably a bit of both. On the side of institutional change, Acemoglu, Johnson, and Robinson certainly didn’t support the notion that such change was always and everywhere achingly slow—they pointed to case of Japan during the 1870s and 1880s as well as South Korea during the 1960s as showing that rapid institutional change could underpin considerable growth. That should give hope to corruption fighters in developing countries who are doing brave and important work improving local institutions.

And the same institutions might produce better outcomes when new technologies allow for cheaper, simpler solutions. Think of vaccines and antibiotics allowing for health outcomes that previously could only be achieved by complex water and sewer systems alongside rigorously enforced public health measures. Or look at the mobile phone that so simplified telecommunications provision that over five billion people worldwide gained phone access in the space of around two decades.

The facts that institutions can rapidly improve whatever our imperfect measures suggest and that there is more to development outcomes than the quality of a country’s governance means that it isn’t naïve to be optimistic about the prospects of poor countries. And the progress we have seen in reducing poverty and increasing incomes worldwide over the past two decades implies it might be the pessimists who are being unrealistic.

I hope you’ll join me tomorrow to celebrate the release of Results Not Receipts: Counting the Right Things in Aid and Development. You can RSVP to attend the event here or watch the webcast online.